Average overdraft fees drop nearly $4, lowest level since 2009

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Diving brief:

  • The average bank overdraft fee fell 11% to $29.80 from last year’s record high of $33.58, according to a Bankrate study released Tuesday. This is the lowest level for fees since 2009, when fees averaged $29.58.
  • ATM fees were on the rise, with the average fee charged by the owner of the ATM, combined with fees assessed by their bank, rising to $4.66 per transaction – the highest sum in three years.
  • Customers needed an average of $539 in their interest-free checking account to avoid monthly service charges, Bankrate found. That’s a 6.4% increase from $507 last year, the first increase in average balance requirements since 2015. To avoid monthly service charges on interest-bearing checking accounts, users needed of $9,658, down slightly from last year’s record high of $9,897, according to the study. That’s still significantly higher than the 2020 figure of $7,550, which was itself a record at the time.

Overview of the dive:

The $3.78 drop in average overdraft fees was no doubt helped by two major US banks – Citi and Capital One – which eliminated overdraft fees over the past year.

Other banks, such as Bank of America, have reduced the amount charged per overdraft.

Still others have reduced insufficient funds (NSF) fees or instituted small dollar buffers or grace periods to allow users to return their accounts to a positive balance.

Overdraft and NSF fees are still prevalent, however, with 96% and 87% of institutions surveyed still charging them in some way, respectively, according to Bankrate. The exit surveyed 245 financial institutions between June 13 and July 1 to compile their data.

ATM fees that banks charge non-customers, on the other hand, hit a new high of $3.14 on average, according to Bankrate. That figure varies by geography: Atlanta residents, for example, pay $5.38 — the highest among the 25 metro areas surveyed by Bankrate. It’s finish from $5.23 last year. Los Angeles ranked lowest at $4.21, down from $3.90 last year.

Most banks continue to charge customers to house their money, with interest-free checking accounts most often charging a monthly service fee of $12 and interest-bearing checking accounts most often charging $25.

While 46% of interest-free checking accounts are free, 53% of interest-free checking accounts will waive fees based on certain transaction activity, including direct deposit and minimum account balance. Of these, 44% will waive fees based on direct deposits alone, up 3 percentage points since 2020. Bankrate found that 99% of interest-free accounts are free or can easily become free, provided certain transaction activity requirements are met.

However, to avoid fees on interest-bearing checking accounts, a minimum balance of 75% of the accounts surveyed is required. However, this balance has almost tripled over the past 15 years. In 2007, the average minimum balance for an interest-bearing current account was $3,316. In 2002, it was $1,866.

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